A decision earlier this year from the Indiana Court of Appeals has shaken the conventional wisdom that holds what is said in mediation stays in mediation and has raised the issue of how important confidentiality is in the alternative dispute resolution process.
The ruling came in Dennis Jack Horner v. Marcia (Horner) Carter, 34A02-1111-DR-1029. In the filing, the husband contended a mistake was made in the drafting of the mediated settlement divorce agreement and that the trial court erred in excluding the extrinsic evidence of this mistake.
On this point, the COA agreed that the trial court did err because the husband wanted to offer the mediation communications as evidence for a purpose other than those prohibited by the Alternative Dispute Resolution Rule 2.11.
The Horner case, decided by the COA in June, is headed to the Indiana Supreme Court.
Noting that the Horner decision has caught the attention of family law attorneys and judges across the state, Drew Soshnick, partner at Faegre Baker Daniels LLP, called it one of the two most significant decisions in family law within the last year. The other, he said, is Tricia L. Sexton v. Travis Sexton, 34A02-1111-DR-01059, which dealt with emancipation.
Attorneys and mediators have operated under the assumption, and caselaw has supported, that everything in a mediation is confidential. In the decision, Pamela S. Fackler v. Melvin J. Powell and M. Jack Powell Jr., Living Trust, 891 N.E.2d 1091, 1096 (Ind. Ct. App. 2008), the COA held the Alternative Dispute Resolution Rule 2.11 “expressly provide(s) that the parties may not waive the confidentiality requirement.”
With Horner, the court more narrowly construed ADR Rule 2.11 than in previous rulings. This, in Soshnick’s view, makes the Horner ruling more about what the court did not say rather than what it did say.
Specifically in Horner, the COA focused on the first sentence of Ind. Evidence Rule 4.08 which states, “Evidence … is not admissible to prove liability for or invalidity of the claim or its amount.”
The second sentence states that, “Evidence of conduct or statements made in compromise negotiations is likewise not admissible.” And the final sentence notes that compromise negotiations include alternative dispute resolution.
Soshnick believes the second and final sentences of Indiana Evidence Rule 4.08 could have been consequential to the decision.
Michael Kohlhaas, partner at Bingham Greenebaum Doll LLP, added that even if a mediated discussion does not directly address the validity or amount of claim, it is the whole reason why parties are in mediation. Still, he sees the decision as perhaps approaching the question of how can the court address possible mistakes because of miscommunication.
Writing for the court, Judge Nancy Vaidik stated, “Although confidentiality is an important part of the mediation, strict adherence to confidentiality would provide an undesirable result in this context – parties would be denied the opportunity to challenge issues relating to the integrity of the mediation process, such as a mistake, fraud, and duress.
“Allowing the use of mediation communication to establish these traditional contract defenses provides parties their day in court and encourages, rather than deters, participation in mediation.”
Family law lawyers see an opposite effect.
“I think for attorneys going into mediation with their clients, it’s going to cause them to be more thoughtful about how they communicate, what they say to the mediator or allow their client to say to the mediator,” Kohlhaas said.
Confidentiality is essential
The idea of opposing sides working together to reach a solution to their dispute was not initially given a warm acceptance. People still wanted to see someone in a robe making the decision, Soshnick said.
Over time, however, the use of mediation has become extremely common and almost preferred to a trial. The practice is utilized in a large percentage of personal injury cases, business contract disputes and family law cases.
“It’s good for families because it’s an easy, better way to resolve disputes,” Soshnick said. “It’s less expensive, more creative and typically provides unique solutions.”
Mediation is almost always suggested by one or both of the attorneys in these cases, or the court will likely order that the parties take a stab at reaching a settlement themselves, Kohlhaas said.
The advantage to mediation is that the parties can, as Soshnick pointed out, reach a unique solution that fits their particular situation.
Deborah Farmer Smith, managing partner at Campbell Kyle Proffitt in Carmel, describes being a mediator as her most favorite thing. The brainstorming that leads the parties to explore options and listen to each other can render creative solutions that the individuals and their lawyers might not have found. Moreover, the final agreement can contain elements that a court could not order.
“Judges can care a lot about people and they do,” Farmer Smith said. “Judges want to do their best but it remains that judges don’t have the luxury of being as detailed in an order as lawyers have in an agreement.”
When both parties want to settle a matter and want the conflict to be over while accepting they are not going to get everything they want, the result of the mediation has pretty good staying power, Farmer Smith said. It is when the parties are not done with each other emotionally that disputes can arise after an agreement is signed.
A key in the process is the confidentiality that surrounds mediation. With limited exceptions, such as those for an admission of a crime or child abuse, all statements made in mediation are private.
In agreeing with Soshnick’s view of the Horner decision, Andrew Mallor, of Mallor Grodner LLP in Bloomington, emphasized the importance of confidentiality.
He is concerned that Horner could open a door allowing individuals to raise issues with the settlement after the agreement has been signed. It is contrary to previous court decisions on the confidentiality of mediations and could bring about more litigation as disgruntled parties, citing Horner, say the language in the document is not what they intended.
The protection of confidentiality encourages individuals to “take extreme steps to compromise,” Soshnick said. If the parties are worried that taking the extra step could come back to hurt them if the case lands in court, they might be more cautious.
“It may have a chilling effect on what people say and how they say it,” he said.
Farmer Smith agreed with the other attorneys that the Horner ruling could make the parties less open in mediation sessions but, at present, she said, the COA decision served as a reminder to attorneys to make certain when an agreement is drafted that both sides understand what the words say.
Mediation sessions can go on for hours and the parties can get tired, which heightens the possibly of rushing to just get something done. Clients, frequently overwhelmed and stressed by the process, easily can become confused and sign an agreement while not fully aware of all the terms in the document.
Even if the Supreme Court upholds Horner, mediation will still be a valuable tool for dispute resolution, the attorneys said.
Farmer Smith does not see the decision as the first step on a slippery slope. Nothing is in the opinion, she said, that gives her a reason to believe the court will continue down the Horner path. •